JUE insight: Differences in rent growth by income from 1985 to 2021 and implications for inflation

Raven Molloy

Journal of Urban Economics, 2024, vol. 142, issue C

Abstract: Shelter is a large share of household expenditures and therefore has a large weight in inflation measurement. Because rich and poor households tend to make different housing and location choices, does the shelter component of inflation differ across the income distribution? I calculate rent growth for households in each quintile of the income distribution from 1985 to 2021 and find modestly lower rent growth for lower-income groups. However, because lower-income households spend a larger fraction of total expenditures on housing, I find little difference across groups in headline inflation. Therefore, different housing and location choices have not generated materially different shelter components of inflation across the income distribution.

Keywords: Inflation inequality; Rent growth; Shelter inflation (search for similar items in EconPapers)
JEL-codes: D12 D31 E31 R21 R31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:142:y:2024:i:c:s0094119024000391

DOI: 10.1016/j.jue.2024.103669

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